• The audit further revealed that EPZA may have reneged on its share of the project.
• The stakes were to be shared with Kenya Leather Development Council in a 50:50 basis.
Image: FILE
Taxpayers may have lost more than Sh25 million in the construction of a waste treatment plant at the Kenanie Leather Park in the face of delayed works.
Auditor General Nancy Gathungu revealed this in a report following the review of accounts of the Kenya Leather Development Council for the year ending June 30, 2021.
She said the amount was irregularly paid to the contractor as part of an advance payment totalling Sh385 million.
Management paid the advance, and thereafter paid Sh90 million and another Sh40 million for various work certificates in 2018 and 2019 respectively.
Gathungu said the payment was irregular as the contract indicated that the value of performance security was to be gradually written off and paid to the contractor until full recovery.
“The council paid the contractor Sh25,718,920 in the financial year 2019-20 instead of recovering the amount from the advance payment as prescribed in the contract,” she said.
“Failure by the council to recover the expenditure totaling Sh25.7 million from the contractor may result in loss of public funds,” the audit report reads.
The query was the main highlight of the alleged infractions in the Sh2.3 billion project that KLDC is executing in a joint venture with Export Processing Zone Authority.
The two entered into an agreement with a local contractor to build a modern common effluent treatment plant.
Apart from the irregular payment to the contractor, Gathungu has also raised concerns that the project has been inordinately delayed.
The project commenced on March 15, 2017, and was due for completion on September 18, 2018. The date was however revised and set for June 28, 2021.
Gathungu reported that by March 2021, about Sh630 million – 27.8 per cent of the contract price, had been spent on the project.
“Comparison of the work plan and targets revealed that the works were at 48 per cent level of completion,” the report reads.
“In view of the continuing delay in completion of the project, the services that it was expected to provide to the shoe industry have not been realised,” Gathungu said.
The audit further revealed that EPZA may have reneged on its share of the project. The stakes were to be shared in a 50:50 basis.
“The advance payment totalling Sh385 million made by KDLC surpassed the 50 per cent value of the venture. The council’s first stake in the project has not been clarified,” the auditor said.
Gathungu further highlighted that it was not possible to confirm whether the contract value has changed and how much the completed project would cost.
After the work commenced, about 60 per cent of the project site (about 500 acres) was flooded by rain waters, a situation which saw the contract reviewed.
The Public Works department recommended that the plant be built on the unflooded portion of the land.
As a result, the plan was revised to accommodate two treatment plants, hence the initial design changed.
Gathungu said she could not ascertain the value of the contract as the agreement between the joint venture partners and the contractor on the revised contract price had not been concluded at the time of the audit.
“In the absence of the complete records on the revised works, it was not possible to confirm whether there was a change in the contract value and how much the completed project would cost,” she stated.
The Leather Council, the report shows, lacks the title deed of a parcel of land housing the Training and Production Centre for the Shoe Industry.
The land was part of assets –including equipment, valued at Sh40 million that were acquired by the council from Kenya Industrial Research and Development Institute.
“The handing over report did not disclose the value of the items, some of which were bought in 1994, or in earlier years and were operational, and others were obsolete and dysfunctional.”
The land in question is in Thika where the TPSCI campus was located but the title deed was yet to be transferred to the council as of June 30, 2021.
“In view of these anomalies, the accuracy and completeness of the property, plant and equipment balance of Sh958 million and ownership of the land could not be confirmed,” the audit report states.